What the BRRRR method checks on a deal

BRRRR is buy, rehab, rent, refinance, repeat. The report runs those checks in that order. This page names the decision each check is allowed to make. It does not replace the refinance worksheet, and it does not add a second calculator. Cash back, cash left, and the worked refinance examples stay on the BRRRR refinance page. The return percent, when the formula has one, is on the cash-on-cash calculator. The dollar figure below is invented. It is the same offer example already on the maximum allowable offer page, so the purchase slot lines up. It is not a closed purchase, not a lease, and not a loan commitment.

Buy: the purchase slot is the offer

The purchase slot is the maximum allowable offer, not the list price. The list price is what the seller is asking. The offer is the ceiling the 25/5/3 formula will pay after repairs, the profit reserve, closing, and holding. Put that offer in the purchase field. Leaving the asking price there treats the list price as if the rest of the strategy had already agreed to it. The later checks then measure the asking price instead of the offer.

The 25/5/3 offer on a $200,000 ARV with $40,000 of repairs is $94,000. That sentence is the whole numeric example on this page. Send the rest of that example, including cash back and cash left, to the refinance page. Build a different offer on the MAO calculator from your own after-repair value and repair budget. The calculator runs in the browser. Nothing you type on it is uploaded.

Rehab: cash in is purchase plus the selected rehab

Cash in for the refinance test is purchase plus the selected rehab. Closing costs are not inside that sum. Buyer closing, seller closing, and the monthly holding line stay on the flip projection. If you paid those costs in cash and you want them inside the refinance test, add them yourself. The formula will not add them for you. A cash-back figure that ignores cash you already spent will look larger than the dollars you can send to the next purchase.

The selected rehab is the repair number you chose for the report. It is not a fresh table of room prices. The scope of work checklist is the room list behind that number. This page does not restate the tier table. If the work you build costs more than the rehab field, cash in rises by that difference, and the refinance decision moves with it. Write the scope before you trust the cash-in line.

Rent: an estimate, not a lease

The rent estimate is the rounded average of 1 percent of ARV and $1.25 per square foot of living area. Each of those two pieces is rounded to the nearest dollar, then the average is rounded. A half dollar rounds up. If square footage is zero, both pieces use 1 percent of ARV, so the result is that 1 percent figure rather than a blank. The estimate is not a lease. A signed rent should replace it. The formula does not go looking for a tenant, and it does not promise a renter at either of the two inputs.

The same monthly estimate feeds the rental card, and that card uses a different expense share. The cap rate guide walks the rental card. Expenses there are 45 percent of gross rent, and net operating income is what remains. The refinance check keeps a 50 percent net of the same rent, and it uses that net only when it is measuring cash still left in the deal. Do not paste one share into the other formula.

Refinance: fully returned is a label, not a yield

The new loan is 75 percent of the ARV you typed, rounded to the nearest dollar. It is 75 percent of your number, not 75 percent of an appraisal you have not received. Cash back and cash left are on the refinance page. One of those two is zero. This formula does not show cash coming back and cash still stuck at the same time. The purchase is treated as cash already in the deal. A hard-money payoff is not subtracted here.

If cash left is zero and cash came back, the result is fully returned. That is not a 0 percent return and it is not an infinite return. Neither phrase is the yield. Dividing the annual net by zero dollars left in the deal is not a percent the report prints as a return. The cash that came back is cash the formula says the loan returned. It is not profit. You still owe the loan. The report marks the row fully returned and does not print a percent as the yield.

Repeat: only returned cash is spendable

Only the cash that came back is available for the next purchase. The loan you still owe is not spendable cash. A fully returned result can fund another offer only up to the dollars that actually came back. The principal you borrowed stays borrowed. Counting the loan balance as cash for the next house counts debt on this house as a down payment you do not have.

This page does not price the new loan payment, a rate, or DSCR. Those formulas are not on this page, and this page does not add them. A refinance can return cash and still fail the month if the payment is larger than the rent you collect. You will not see that failure here. There is no rate to multiply and no debt-service coverage line to print. Add a payment, a rate, or a debt-service check outside the report before you treat the next purchase as funded.

Where the two yield numbers disagree

Cash-on-cash and cap rate can disagree on the same house because they divide different income by different piles of cash. Cash-on-cash divides a 50 percent net by the cash still left in. When cash left is zero, that division is not performed as a yield. Cap rate divides a 45 percent net operating income by purchase plus rehab. The cap rate denominator is every dollar the formula counts as cash in, including dollars the refinance later returns. The cash-on-cash denominator is only the dollars the loan did not return.

A deal can look ordinary on one line and extreme on the other without either line being mistyped. Read the cap rate page for the rental card. Read the cash-on-cash calculator for the percent on the dollars still in. This page does not work a new numeric example beyond the $94,000 offer above. The two worked refinance examples stay where they are.

Questions

Open the sample analysis after you sign up. The sample analysis is created after signup and uses invented figures, the same way the $94,000 offer on this page is invented.